HILLCREST HOMES BUSINESS PLAN - 2019/20 to 2021/22
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HILLCREST HOMES
BUSINESS PLAN
2019/20 to 2021/22
MARCH 2019
1INDEX
1. EXECUTIVE SUMMARY
2. VISION AND STRATEGIC OBJECTIVES
3. HILLCREST: PAST, PRESENT AND FUTURE
4. OPERATING ENVIRONMENT ANALYSIS AND RISK MANAGEMENT
5. PRODUCTS AND SERVICES
6. ASSET MANAGEMENT STRATEGIES
7. INVESTMENT IN NEW HOUSING
8. FINANCIAL PROJECTIONS SUMMARY
9. KEY OBJECTIVES 2019/20
10. APPENDICES
21. EXECUTIVE SUMMARY
KEY OBJECTIVES
This Business Plan covers a three year horizon from 2019/20 to 2021/22. The plan will be
regularly monitored to ensure that the objectives are still appropriate and on target. The
detailed objectives will be revised and updated annually.
The key objectives for Hillcrest over the next three years will be;
• Deliver the 2019/2022 development programme
• Expand and increase the delivery programme in the Aberdeen(shire) area
• Finalise and implement the rent re-setting exercise after a full consultation exercise by
1st April 2020
• Private finance of £40 million to be secured over the period of the plan
• Move to the delivery of the first Build to Rent Housing
• Develop a sales and exit strategy for Leith Links
• Prepare a group-wide strategy on Health and Social Care Integration
• Re-branding exercise successfully communicated and implemented
• Progress deliver of EESSH programme and gas installation to tackle fuel poverty
effectively
• Produce and submit the annual assurance statement for the SHR
• Review the GDPR implementation, data management process and the FOI
requirements for Hillcrest
• Develop and begin the delivery of a Digital Transformation Programme
• Continually review the impact of Brexit and put in place mitigation measures where
feasible
• Develop a plan to deal with the changing accommodation requirements as a result of
Housing First
3CONTEXT
Hillcrest is a mature, large, regional, Scottish RSL with a track record of providing quality
homes and tenant services. The Association has a continuing, strong financial capacity and
aims to be innovative in the funding, range and delivery of services.
Hillcrest is one of the few Scottish RSLs with a large and diverse group structure and has four
trading subsidiaries undertaking a range of activities which complement and relate to the
Association’s objectives. This Business Plan is primarily for Hillcrest but refers to its role as
the parent of a group of companies. Each subsidiary company prepares its own annual
Business Plan for approval from the Committee of Management.
Hillcrest also produces a consolidated Business Plan which showcases the overall objectives
for the Parent and all Subsidiaries in the Group.
Within Hillcrest there are also annually produced departmental and/or activity plans outlining
in more detail how strategic objectives in this plan are translated into specific performance
targets for departments, teams and individual staff.
4PROCESS
Hillcrest approaches business planning as a continuous process rather than as a short-term
annual event. Progress against key plan objectives is reported to every Committee of
Management meetings and monitored quarterly at senior management team meeting.
Amendments are made when necessary in response to either unforeseen opportunities and
events or significant delays caused by external or other factors. The approach now is to use
the Business Plan as a continually evolving process rather than a static production or event.
For this plan, there was an away day held with the senior team and management team in the
organisation. This was followed by a Business Planning session with Committee Members to
discuss the challenges and opportunities facing Hillcrest in the Business Plan period. All the
departments within the organisation also had sessions on business planning to ensure that
the operational objectives underpinned the strategic objectives set by the Committee.
The Business Planning event focussed on looking at the key objectives alongside the operating
environment, considered opportunities available to Hillcrest and reflected on the risks
associated with these.
There are a number of key Stakeholders and externally generated information that is
considered when writing the business plan. This includes;
• Tenants – the input from tenants is considered under a variety of ways including
taking account of the tenant satisfaction survey, the rent consultation, discussions
with the Residents Review Panel and outcomes from the Tenant Scrutiny Reports.
• Councils – Hillcrest operates over a number of local authority areas and identifies a
lead person to be the primary contact for each area. Discussions are also held with
key officials for the Strategic Housing Investment Programme to match our
development aspirations and sites where there is housing need.
• Scottish Government – Hillcrest has a good relationship with individuals in the key
areas for housing and care and contributes to consultation exercises and steering
groups as appropriate.
• Health and Social Care – there has been some progress made in delivering the health
and social care integration in conjunction with considering housing need. Hillcrest has
identified a lead to be the key link between the organisation and the health board.
• Lenders – Hillcrest has a proactive relationship with lenders covering both current
lending facilities and exploring the appetite for providing further facilities in the
future.
• Scottish Housing Regulator – through the identified relationship manager, formal and
informal discussions are held regularly to consider areas of growth or new business.
• Other Partners and organisations – Hillcrest has a track record of participating and
assisting in initiatives which will benefit both our tenants and other organisations in
the sector. This includes in areas the Fairness Commission, Social Bite, schools and
local Forums. It is intended that this approach will be continued going into the future.
52. VISION AND STRATEGIC OBJECTIVES
MISSION STATEMENT
Homes, Communities, Care and Opportunities.
VISION
A strong effective Scottish organisation, improving people’s quality of life.
STRATEGIC OBJECTIVES
Provide good quality, well maintained housing at affordable rents
Contribute to building sustainable communities
Provide quality, creative, responsive care and support services
Contribute to social, economic and environmental activities
Ensure resources, skills and structure to meet objectives
GUIDING PRINCIPLES
Excellence to do what we do well
Impact to make a positive difference with our work
Innovation to be creative in our activities
63. HILLCREST: PAST, PRESENT AND FUTURE
PAST
Hillcrest is a mature Scottish Registered Social Landlord (RSL) and celebrated its 50th
anniversary in 2017/18. Originally the Association’s core objective was improving individuals’
living conditions and contributing to area regeneration by modernising sub-tolerable, mainly
tenemental, property in the urban areas of Dundee and Perth.
Hillcrest registered with the then Housing Corporation in 1976 under the Housing Act 1974
and immediately set about creating its own in-house staffed services instead of, as previously,
sourcing all services from consultants. From the same period a proactive membership drive
produced a larger membership base with a notable proportion of tenants also represented on
the Committee.
In the early 1980s Hillcrest expanded its operating range from the cities of Dundee and Perth
to encompass the whole of Tayside and diversified into new build to complement urban area
regeneration strategies and as a way of providing new housing in non-urban areas. The
successful and award winning Upper Dens Development, completed in the mid-1980s, was a
major landmark in establishing Hillcrest’s reputation as a capable, quality developer and
housing provider.
During the 1990s Hillcrest set up its first subsidiary providing agency services to RSLs and
other housing organisations. Strong growth occurred through successful stock transfer bids
and RSL “mergers” in the form of Transfers of Engagements.
The volume of stock in Angus increased sufficiently to justify a fully devolved, local tenant
service which has subsequently been extended to Hillcrest’s operations in Perthshire,
Edinburgh and Dundee.
From 2001/02 Hillcrest entered partnering negotiations with several other RSLs. These
discussions culminated in a series of mergers in 2003/04 with three other RSLs which
produced a dramatic growth spurt for Hillcrest, created a more diverse range of activities and
transformed the previously simple group structure. Further evolution of the group took
place in 2006/07 with the entry of Gowrie Housing Trust (now Hillcrest Enterprises) into the
group as a subsidiary.
Northern Housing Company joined the Hillcrest group as a subsidiary in September 2010 and
provides intermediate, or “mid-market”, renting opportunities.
Hillcrest achieved the ambition of delivering a housing programme in Aberdeen and
Aberdeenshire in the 2017/18 financial year and significant further growth is planned over
the period of this business plan.
7PRESENT
In 2019 Hillcrest is one of the largest “traditional” Scottish RSLs with over 7,000 rented homes
and covers a large geographical are in the east of Scotland. Hillcrest remains an active
developing RSL with stock growth in all of the areas of operation during the business planning
period.
Hillcrest has charitable status and is also the parent of a range of subsidiaries some of which
are substantial companies in their own right, with growth prospects.
Hillcrest has over 30 voluntary Committee or Board Members who sit on either the
Committee of Management and/or one of the Subsidiary Boards. These individuals are
responsible for setting and overseeing the strategic direction of the organisation and its
effective governance. Committee/Board Member recruitment, induction and training are
critical. Hillcrest has a detailed induction process, conducts annual appraisals and provides
regular internal and external training to ensure Committee/Board Members have the
knowledge and expertise to make effective decisions.
Across Hillcrest there are now over 1,000 employees and consequently the organisation has
its own dedicated HR and Learning & Development teams. Although staff turnover is lower
than the market average, Hillcrest is continually recruiting new staff and as such there is
particular focus on good quality induction to ensure that new members of staff are aware of
the Hillcrest Commitment to delivering excellent tenant services.
Over the year to March 2019, Hillcrest has continued the roll-out of mobile working to allow
for more real-time reporting of any estate management issues and a more proactive
approach to dealing with tenant and customer queries. This allows for immediate capture of
key information and will assist in the planning of repairs and more effectively use resources.
Hillcrest secured a very competitively priced Private Placement in the year to March 2019.
This is underpinned by a large Revolving Credit Facility of £72.5 million. The joint funding
approach secured ensures that Hillcrest can maintain the necessary cash balance for
operational activities but also effectively manage the development programme by drawing
down funding when required.
The new EESSH (Energy Efficient Standard for Social Housing) have been introduced to ensure
all properties as a minimum meet this standard. EESSH 2 is out for consultation and will be
finalised during the period of the business plan. Any necessary action resulting from the new
standard will be costed and programmed in future plans. Hillcrest has also approved a gas
replacement programme amongst other measures to tackle fuel poverty in conjunction with a
dedicated energy efficiency team.
Recent years’ improvements in voids and arrears, against the national trend, has continued in
2018/19 and in particular embed the newly approved centralised rent recovery team to focus
on income management and address challenges resulting from Welfare Reform.
FUTURE
8Hillcrest aims to remain a quality social landlord that is financially sound, able to effectively
manage and maintain its substantial existing stock portfolio and play a role in continuing to
deliver a supply of new housing. Hillcrest will continue to deliver new homes in their
traditional geographic areas, as well as furthering the development aspirations to deliver
social housing in Aberdeen, Aberdeenshire and East Lothian. Geographic expansion will be
carefully planned for and controlled.
The Scottish Government has increased its target to 50,000 new homes delivered in the life of
the current parliament of which 70% is for social rent. This represents a £90m year on year
increase in subsidy available delivering 20,000 new homes. The current grant level subisidy
has allowed Hillcrest to for delivering over 1,747 houses over the period of the business plan.
The Scottish Government has a consultation on the “Housing Beyond 2021” as the current
commitment expires in 2021. Hillcrest has submitted a response and continues to engage
both directly in the consultation exercise and also through the SFHA.
Hillcrest aims to continue providing new supply housing for all affordable categories. Hillcrest
is proposing to develop in the Build to Rent Sector through either direct ownership or leasing
possibilities. The different tenures that may be delivered will be channelled through Hillcrest
Enterprises. There are a number of possibilities being presented to Enterises which e will be
scrutinised, in particular for financial viability, before being presented for consideration.
The Welfare Reform agenda has had little impact for Hillcrest and its tenants to date although
there are early signs that rent arrears are increasing slightly. The Welfare Reform Strategy is
in place to help manage and mitigate the impact of Welfare Reform. Performance against
objectives in the Welfare Reform Strategy is monitored regularly by the Operations Sub-
Committee. Hillcrest’s Tenancy Sustainment team are working with tenants to ensure that
they are fully aware of both their responsibilities when in receipt of Universal Credit and more
particularly Direct Payment to assist them in budgeting and financial management. It is
anticipated as the rollout continues that this will be an ongoing challenge for Hillcrest and
that necessary resources will need to be in place to manage the changing needs of tenants
and demands of Welfare Reform.
Hillcrest is further developing its Tenancy Participation Strategy and has a number of
interested tenants participating in a number of different areas to look at the service delivery.
The Residents Review Panel will continue to work with Hillcrest to carry out further
inspections in the near future. In particular over the next year, Hillcrest will review key areas
of consultation with tenants for example, rent increases and how best to communicate with
tenants on a more regular basis. The introduction of a tenants app is to be delivered over the
first year of this business plan which should allow more self-service and an improved
customer experience.
In its role as the parent of a large group structure Hillcrest is taking steps to continuously
improve governance standards and develop “excellence in governance” for the group. The
organisation will continue to review best practice in governance and introduce changes and
new procedures where appropriate.
94. OPERATING ENVIRONMENT ANALYSIS
AND RISK MANAGEMENT
Operating Environment
The overall operating environment for the Registered Social Landlord (RSL) sector is currently
very mixed. There are some real positives around development funding both for availability
and subsidy levels. There are real challenges created by the ongoing Welfare Reform changes
and austerity measures still to be rolled out. The core business of providing good quality,
well-maintained houses to people in housing need is still a strength of Hillcrest. The short-
term and long-term financial projections are robust with the 3-year projections still showing a
healthy financial position and good financial management despite a stepped increase in
development activity.
The 30 year projections continue to show that Hillcrest remains financially strong during the
period of the plan. Detailed sensitivity analysis on a range of scenarios are also run. In all of
the scenario planning undertaken, there are no risks identified in the early years that will
impact on the viability of the organisation and any longer term impact is minimum. More
information is contained within section 8 of the plan.
Areas of the operating environment that are particularly relevant are;
Political
During the period of this business plan, the UK will have negotiated the Brexit deal and the
Scottish Government may still be pursuing a second referendum option. It is recognised
during the period up to and perhaps beyond the final Brexit deal being agreed, this will be an
unsettling period for employees. Hillcrest has already put in place a process to establish
where employees may need additional support for nationality applications. The actual
implications this may have for Hillcrest are difficult to quantify, however, there needs to be
sufficient flexibility built into the assumptions to cope with either an increase in inflation or
interest rates as well as pressure on both revenue and capital subsidy levels. Workforce
planning and recruitment will be a key focus as well.
Scottish Housing Regulator
The Scottish Housing Regulator has completed a review of the Regulatory Framework that
governs their interaction with the sector. This review has brought in some changes to the
current standards and also changes to a number of other guidance notes - in particular
Notifiable Events. The presence of the SHR and the intervention powers in place provides
comfort to Lenders about the viability of RSL’s and is taken account of when funding deals are
negotiated and the competitiveness of the terms. Hillcrest will review current policies and
procedures to ensure that any changes are implemented. The assurance statement required
to be completed and submitted by the Committee of Management will also be a key priority
for Hillcrest.
10Affordability and Value for Money
There is a focus on both the affordability of the rents charged to tenants within the Social
Housing Sector and whether organisations delivering the service provide value for money.
Hillcrest views value for money, affordability and the provision of a quality service to be
inextricably linked. Hillcrest also feels that the provision of additional services to tenants to
sustain their tenancies is a key part of the role of a responsible landlord.
Health and Social Care Integration
The Health and Social Care Integration to date has largely focussed on the Joint Integration
Boards’ recruitment within the new structures. Housing in general has not been actively
involved or encouraged to be involved in the early discussions although there are some signs
that this is now changing as the focus begins to shift onto the accommodation needed.
Hillcrest, with Hillcrest Futures will work within local authority areas to establish where
contributions can be made in particular around addressing bed-blocking and provision of care
and support at home.
Development Activity
The Scottish Government has a target of delivering 50,000 new homes over the lifetime of the
current parliament, 35,000 of which are to be for social rent. There has been a significant
amount of extra money provided through the overall subsidy available to develop these
homes and the amount of subsidy per unit has also increased. Hillcrest Homes works over a
number of council areas and all have received a higher allocation of grant allocation than
expected and are looking to deliver more homes over a shorter period. For the purposes of
this business planning exercise and the preparation of the financial projections, the officers
have looked to maximise the number of new homes delivered over a relatively short period.
Housing First/Rapid Re-housing
Homelessness has risen up the agenda over the last few years and the Scottish Government is
currently consulting with all local authority areas on Housing First and Rapid Re-housing.
Whilst slightly different, both focus on providing the tenant with appropriate housing
accommodation and support for as long as the individual needs it. Hillcrest has a lot of
homelessness accommodation that was modelled on the perceived need back in the 1990’s.
Expectations and aspirations have changed and a lot of the current accommodation may be
deemed not “fit for purpose”. Through regular engagement with the relevant local authority,
Hillcrest will establish the needs going forward and re-model accommodation where
appropriate and cost-effective.
Private Finance
A consequence of the increased development activity is that Hillcrest Homes will need to
secure long-term funding of around £40 million during the period of the business plan. The
current base rate rose to 0.5% in the year to December 2017 however the long-term rates
predictions are still relatively stable although, Brexit negotiations do produce short-term
volatility. There is still an active and steady market through Private Placements which would
be the most likely source of future funding.
Welfare Reform
There is a Welfare Reform Strategy which highlights the following areas as the main aspects
of Welfare Reform over the 3 year period covered by the business plan:,
11• Digital access and digital literacy to make benefit claims
• Benefit cap and benefit freezes
• 18 -21’s access to housing costs
• Changes to disability benefits
• Supported Housing Costs
Hillcrest has a duty to proactively engage and identify tenants who may require additional
support to manage the impact of arrears and fuel poverty. Hillcrest will work with
subsidiaries to review, from a Group perspective, areas where additional assistance can be
given to combat unemployment, mental health issues, social isolation and access to training.
Rents
The primary source of income for Hillcrest Homes is rental income from tenants. Tenants
within the RSL sector can be largely dependent on Housing Benefit and around 60% of the
rent income received by Hillcrest Homes is from Housing Benefit. As austerity measures are
rolled out, the pressure on the amount spent on housing benefit will mount and there will be
increasing scrutiny on rent levels in the housing sector. From 1st April 2020, Hillcrest will base
rent increases on CPI.
Hillcrest is undertaking a fundamental review of the rent setting policy which will also
consider affordability and service charges. The review of the rent setting policy will be part of
a large engagement and consultation exercise with tenants to take on board their views on
the proposals. The key recommendations will be discussed by the Committee over the
forthcoming financial year and a significant part of the decision making process will be a
consideration of the comments and viewpoints of tenants.
Tenant Involvement
Hillcrest has set up a group of “interested tenants” to develop tenant scrutiny and further
involvement and engagement with tenants. Due to the geographical spread of the housing
stock and area office structure, tenant engagement has always been difficult to fully embed in
the organisation. Consultation exercises in areas like rent increases often generate a poor
response and Hillcrest plans to fully review its consultation process to increase the number of
returns and produce meaningful involvement. It is acknowledged by the SHR that this is a
challenge across the sector and is included in the review they are carrying out on the
Regulatory Framework.
Pensions
The latest actuarial valuation was in September 2018. The results of this valuation are not
known at the time of writing this plan. Once the results are known and the proposals from
the Pensions Trust have been received on the way forward, Hillcrest will review the impact on
the organisation. There is a sum included for deficit repayments until 2022 and a
“placeholder” figure of £500k per year for 3 years after that for prudence purposes.
Staff Engagement
Hillcrest has been accredited with Investors in People for over 15 years and continuously tries
to achieve the highest standard. Investing in young people to assist in workforce planning is
also a key area to identify and develop future housing, care and administrative professionals.
This is linked with providing apprenticeships within Hillcrest Maintenance for various trades
to increase employability and opportunities. Hillcrest has good partnerships with local
12schools to raise awareness of the opportunities within Hillcrest and to assist young people in
developing life skills and interview experience. This will be developed into an “Apprenticeship
Strategy” over the forthcoming business planning period.
Communication, Media and Publications
Hillcrest has regular interaction on Social Media sites such as Twitter and Facebook and
looking to develop and improve this to meet audience and customer expectations. The new
website is much improved, particularly with the ease and speed that customers can source
information.
Hillcrest is an early adopter of QL version 5 (housing management software) and the new
customer relationship management software will be introduced in 2019. This is closely
followed by the other applications in the suite. Hillcrest is also in the process of developing a
customer self-service “app” and allow customers greater access to things like reporting and
making an appointment for repairs at times that suit.
Fire Safety
Legislative changes to the Electrical and Gas safety Requirements in Social Housing have been
introduced. All social housing will require a smoke alarm in each circulation space and an
interlinked smoke and heat alarm in the kitchen. Timescales for this being in place are by
February 2021 and has been included in the budgets.
13Subsidiary Activity
This is the Business Plan for Hillcrest Homes, but as the parent in the Group, a brief synopsis
of the key issues for the subsidiaries has been included for information and consideration.
Hillcrest Futures
Hillcrest Futures is probably facing one of its most challenging funding periods over the
business planning period. The continued cuts within council budgets and the move towards
the Scottish Living Wage has created a “perfect storm”. The initial budget prepared has been
noted but not approved as a significant deficit is forecast. This is an immediate concern for
the financial viability of Hillcrest Futures as it has large cash and revenue reserves to absorb
short-term funding issues. The Managing Director is actively engaging with all local council
areas to try to negotiate either an increase in funding or reduction in service provision. This
issue is not unique to Hillcrest Futures but to all care providers across all sectors and all
geographical areas.
The SSSC has opened the registration for the care workforce. This has been ongoing for some
time but now all care workers will need to be qualified to be allowed to work in the sector.
This adds to the ongoing pressure on workforce planning and recruitment. The Managing
Director of Hillcrest Futures is exploring ways to make the package for employees more
attractive to increase staff retention.
Technology is a key focus for Hillcrest Futures. There is new software and apps being
developed which will improve the service to individuals, reduce wasted time and allow for
support packages to be more tailored and focussed. Hillcrest Futures is already working with
a number of other care providers to assess where technology that has already been rolled out
can be adapted to their client group.
There is still considerable growth prospects for Hillcrest Futures, particularly in areas like
Home Care. There are also challenges for temporary accommodation based services across
the geographical area but mainly in Edinburgh. Whilst the transition plans are still being
prepared and the funding for Housing First unclear, it is difficult to assess what the final
impact and timescales will be.
Hillcrest Enterprises Ltd
The new Hillcrest Enterprises starts to trade from 1st April 2019. Over the last year the Boards
of Hillcrest Enterprises and Northern have worked together to put in place a strategy for the
initial “settling” down period and also the areas of growth in the future.
The management and maintenance of the current housing stock will still remain a key priority
and in particular for the older refurbished mid-market tenement properties. The investment
in this stock must be carefully planned to maximise the future longevity of the properties.
The re-development at Ellengowan Drive should get final approval in March/April 2019 and
demolition of the cleared stock will commence.
The aspiration to deliver Build to Rent properties is still a key focus with a number of
opportunities being presented for consideration.
14Hillcrest Maintenance
The principal customers of Hillcrest Maintenance are the asset-owning companies in the
Group. Hillcrest Maintenance has aligned its budgets and growth plans to Hillcrest Homes
and Hillcrest Enterprises - and continues to make small profits on an annual basis. The
primary focus of Hillcrest Maintenance is to continue to increase Value for Money and
improve the Customer Service experience for tenants and service users.
Hillcrest Maintenance produced an Apprentice and Training Programme in 2018/19 which
highlighted their commitment to giving opportunities for individuals to have access to work
placements, work experience and for an apprentice. This focus will continue over the
forthcoming years and be further developed to provide opportunities to a wide and diverse
range of individuals.
Leith Links
Leith Links is the Limited Liability Partnership organisation which owns the Sailmaker
Development, delivered through the National Housing Trust initiative in 2013/14. Hillcrest
bought the “developer” share in this company for £2.5 million. The National Housing Trust
initiative is a loan deal from the City of Edinburgh Council in the form of the Public Works
Loan Board deal. This must be paid off in full by the end of the 10th year of ownership in the
development. The initiative’s primary focus was to encourage people to rent these homes
initially with a view to buying them from the LLP between the 5th and 10th year anniversary.
The budgets for Leith Links have been prepared assuming that there will be 21 properties sold
per year over the 5 year period leaving 40 unsold at year 10. The sums received will be in line
with the original valuation and will pay off the loan to CEC by year 10. This has been reflected
in both Leith Links and Hillcrest Enterprises (the landlord) projections. There has been no
income reflected in the accounts for Hillcrest Homes apart from a return of the £2.5million
investment in year 10. The Properties can begin to be sold from June 2019 with a proposal
currently being considered by the Leith Links Board and City of Edinburgh Council for the way
forward.
15Legislative Changes
The main areas of legislative change which affect Hillcrest Homes over the period of this
business plan are;
• Scottish Housing Act 2014 which received Royal Assent in August 2014. This will come
into force in May and November 2019 respectively. All tenants have been advised of
the changes in writing and where possible, household composition has been captured.
• Guidelines for Regulation of Data Protection came into force from May 2018. Hillcrest
has a designated Data Protection Officer, new Record Retention schedule and is clear
about access to and use of date. Training has been delivered to ensure that staff are
aware of the new responsibilities in particular around data sharing and date protocols.
An audit will be started in the early part of this business plan to identify any areas of
weakness that might need to be addressed.
• The Scottish Housing Regulator will have published the new Framework and
Regulatory Standards, effective from 1st April 2019.
• The Scottish Government have formally concluded that the Freedom of Information
(Scotland) Act 2002 will be extended to include RSLs, effective from 11 November
2019. This will not apply to care/support services, mid-market rent, accommodation
for private rent and factoring.
• EESSH 2 – new standard will be published in 2019.
• Rapid Rehousing Policy and outcomes from the transition plans will be available for
review in 2019.
16Risk Management
Hillcrest has undertaken a comprehensive review of its risk management strategy. Risk
reports and the risk register are presented to the Committee of Management of Hillcrest
Homes, the Audit and General Purposes Sub-committee and all Subsidiary Boards for
consideration, comment and approval. The Senior Team also considers risk at their monthly
meetings and has a quarterly review of the full risk register. Risks can be added to the
register and scored at any time. There is also a full Risk Assessment Procedure which must be
followed for all new activities or projects being considered and this is linked into the risk
register for completeness.
For the purposes of this plan a number of the key high risks are identified.
Key Risk Management/Mitigation Outcome Expected
Sales Strategy for Sailmaker • Savings scheme has been • Sales to be taken up and
approved investment repaid in full
• Concierge on site
• The strategy has been
approved by the
Committee of
Management
• Discussions are underway
with partner organisations
Financial loss due to an • Income Management • Rent arrears to stabilise or
increase in rent arrears Team in place increase marginally
caused by Welfare Reform • Tenancy sustainment and • Comprehensive review of
money advice team to procedures to identify
provide extra guidance areas for improvement
and support
• Internal Audit to be
undertaken to review
processes and procedures
with best practise
Cyber Security Breach, • Implementation of a • Risk mitigated through
resulting in IT systems being number of security tools high level of on-site and
compromised and policies and clould-based security
procedures measures
• Departmental operational
risk register that addresses
sources of threat
17• Detailed procedures to • No data breaches
Financial loss and provide overarching
reputational damage arising guidance
from data loss • Key priority of corporate
services dept and
Information Governance
officer
• Ongoing training and
raising awareness sessions
delivered
Risk of leases being ended • Review of all temporary • Alternative use found for
due to change in Government accommodation the accommodation and
Policy • Review of transition plans funding provided to re-
and direct engagement model
with the LA’s
185. PRODUCTS AND SERVICES
Hillcrest’s core activity is providing quality housing for people in need at affordable rents.
Hillcrest does this by;
managing and maintaining the existing stock to a high standard
providing housing opportunities to new tenants from turnover of the existing stock
developing new houses for rent
offering energy advice for tenants to combat fuel poverty
keeping rent increases reasonable
money advice and tenancy sustainment assistance and tenancy support
pro-active approach to complaints review to improve service and standards
Hillcrest is also the parent of an evolving group of companies which undertake
complementary activities under Hillcrest’s overall control. Group subsidiaries provide the
following activities;
Hillcrest Futures primarily provides care and support services to a wide range of clients
over a significant geographic area and is hoping to develop respite accommodation over
the period of the business plan’.
Hillcrest Enterprises is the profit-making arm to provide gif-aid money to fund activities
that are not part of the core package. Currently this is primarily around mid-market rents,
a small number of open market rent properties and agency services.
Hillcrest Maintenance is a maintenance contractor now with over 150 staff at peak times
and a turnover in excess of £10 million. Hillcrest Maintenance primarily delivers
maintenance services to the asset owning companies in Hillcrest but also been successful
in tendering for other external works.
196. ASSET MANAGEMENT STRATEGIES
INTRODUCTION
The full Hillcrest group property portfolio now contains:
Over 7,000 housing units (including 242 shared ownership).
18 projects of supported accommodation leased to, or supported by, Hillcrest Futures
19 projects of supported accommodation leased to external care organisations
49 shops. Of these 42 belong to Hillcrest
298 garages. Of these 181 belong to Hillcrest
2 training academies owned by Hillcrest
8 office premises (two of which are leased by Hillcrest)
Taking all the maintenance programmes into account, Hillcrest will be investing over £37.7
million in the housing stock over the next 3 financial years.
The main parts of the strategy are to:
• undertake planned maintenance maximising component lifecycles
• maintain high performance and further improve satisfaction levels in day to day
maintenance as well as moving to an appointment service for repairs
• support the Hillcrest Maintenance through well planned, continuous programmes
• prepare for compliance with the Energy Efficiency Standard for Social Housing by 2021
• streamline processes resulting in efficiencies and positive tenant experience by the
creation and implementation of the Property Department
PLANNED MAINTENANCE
Hillcrest has a comprehensive planned maintenance programme in place to ensure that the
stock is effectively maintained. This includes areas like window replacement, kitchen and
bathroom replacement, painterwork, roofs, electrical works and other components that can
be handled in a planned cycle.
The data held is regularly reviewed to ensure that replacement cycles are still appropriate and
the financial amounts held against the various components are still accurate. Inspections are
regularly undertaken to underpin the data held in the database. The anticipated spend on
each programme are then incorporated in the 30-year financial projections for affordability
and if required additional financial planning. To further improve this Hillcrest is working on
the collection of data on a property specific basis whereas this was previously held at
development level.
20DAY TO DAY MAINTENANCE
Hillcrest will invest over £4.2 million in day to day maintenance and voids in 2019/20 issuing
over 20,000 orders. Completion performance, satisfaction levels and turnaround times are
all important performance indicators to Hillcrest. Targets are regularly set and monitored in
order to make better use of tenants comments to improve the service.
HILLCREST MAINTENANCE
Hillcrest Maintenance is an in-house maintenance team. Hillcrest Maintenance is
increasingly important to Hillcrest’s Property Strategy as its competitive rates coupled with
the absence of VAT on labour costs produce significant savings.
Hillcrest Maintenance turnover on Hillcrest work in 2018/19 is over £10 million. The majority
of this is on planned maintenance, component replacement, void work and current repairs.
ENERGY EFFICIENCY
Hillcrest has a Fuel Poverty Strategy and an Energy Efficiency Advice Team to try to ensure
that tenants receive comprehensive energy advice to minimise their fuel bills.
Hillcrest approved the works required to bring all properties up to the EESSH in the financial
year to March 2017. The cost of this work is incorporated into the budgets and programmes
are in place to undertake the work over a 3-year period and in time to meet the EESSH
deadline. As part of the analysis to identify properties that did not meet EESSH standards, it
was apparent that, in some areas of our stock where EESSH was met, due to the nature of the
property, heating in place and location of stock, further work would be required to ensure
that some tenants were not still “fuel poor”. This will be progressed over the period of the
business plan and will include looking at alternative fuel sources and new technology to
improve the energy efficiency and cost of heating homes.
HILLCREST HOMES – NON-HOUSING PROPERTY ASSETS
Hillcrest has a small portfolio of shops on the ground floor of some tenements. With minor
exceptions these have been fully let for long periods. The Operations Sub-Committee
consider a quarterly report on the performance of these properties and where required will
approve additional investment to secure future tenants. The commercial portfolio generates
an annual surplus which is used to further the services provided to tenants.
217. INVESTMENT IN NEW HOUSING
The Scottish Government has confirmed the importance of continuing to provide affordable
housing by its commitment to deliver 50,000 new homes before the end of this Parliament in
2021. The Scottish Government has backed this commitment by increasing the grant
allocation over council areas and also increasing the subsidy per property. Hillcrest is building
on its current excellent reputation for delivering high-quality housing, in budget and on time
alongside looking at capacity and has significantly increased the development programme
over the period of this plan. Hillcrest is also working to deliver housing in Aberdeen,
Aberdeenshire, and East Lothian over the period of this plan.
DEVELOPMENT PROGRAMME FOR 2019/20 to 2021/22
Initial programmes have been discussed with local Councils and the Scottish Government and
the Strategic Housing Investment Programme are almost finalised at the time of writing this
plan. However the estimated completions for 2019/20 and 2020/21 are based on already
approved or committed projects most of which will start on site before 31/03/19. The figure
for 2020/21 is an estimate at this time which will be confirmed once funding programmes are
known and agreed.
Year Social Mid-market Total
Rent Rent
2019/20 247 81 328
2020/21 747 102 849
2021/22 355 215 570
TOTAL 1349 398 1747
THE WAY FORWARD
Future development activity beyond the current programme will be dependent upon;
• continuing availability of Scottish Government subsidy for both traditional social rent
and mid -market housing
• the availability of acceptable loan finance
• continuing confidence in the demand for mid-market renting
Our own long-term financial projections show a financial capacity for approximately 250+
new homes per annum well into the medium-term.
228. FINANCIAL PROJECTIONS SUMMARY
A summary of the results before any transfer to/from designated reserves or payment of
pension deficit creditor for the three year period to 2020/21 is as follows:-
Surplus for the
year
2019-20 £1.9m
2020-21 £3.6m
2021/22 £3.8m
Three Year Total £9.3m
Note: the above results exclude the pension deficit payment as an expense of £3.4M over the 3
year period as the pension deficit is included within creditors in accordance with accounting
legislation.
Key Assumptions Used for Budgets:
Outturn Budget Budget Budget
Assumption 2018/19 2019/20 2020/21 2021/22
CPI % 3.0% 2.3% 2.1% 2.0%
1
(Oct 17) (Oct 18) (Dec 19) (Dec 20)
RPI % 4.0% 3.3% 3.0% 2.9%
2
(Oct 17)
3 Rent Increase % 3.5% 2.45% 2.1% 2.0%
4 Housing Voids % 2.1% 1.75% 2.0% 2.0%
5 Housing Bad Debts % 1.5% 1.75% 2.0% 2.0%
6 Salary Award 3.0% 2.0% 2.0% 2.0%
7 Loan interest – Base Rate % 0.75% 0.75% 1.00% 1.25%
Interest receivable
Deposits – based on 95 days
8
> £1M 0.50% 0.50% 0.50% 0.75%
Special Interest Acc – RBS 0.15% 0.15% 0.15% 0.25%
2330 – Year Projections
The 30-year projections have been prepared using the assumptions detailed in the table
below. These projections reflect the current proposed development programme going
forward and the relevant rental income streams. This reflects a continuation of the extensive
programme of almost 2,600 units. From Year 6 onwards there is an assumption that the
development programme will be 250 units per annum of which 75 units are MMR and 175
social rented properties.
This level of development will require significant private loan funding to support the overall
cashflow position. Additional funding of £40M is forecast to be required in years 1 to 3. Any
further increase in the development programme would have a negative financial impact on
the surpluses generated due to the increased loan interest charge for the additional loans. A
review of the covenant compliance has also been carried out and covenants are not breached
over the 30 year period.
Sensitivity review
There has been a sensitivity analysis undertaken which has varied the key assumptions used
In calculating the original budget. The main areas that can impact on the longer-term viability
of the organisation is as follows:
• development activity
• development funding per property
• interest rates
• rate of inflation
• rent increases
• welfare reform
Whilst all of the above scenarios can impact on the organisation in the short-term, early
intervention can mitigate this particularly in the area of development activity.
Budgets are prepared annually and include updated assumptions which will continue to be
closely monitored. Should the assumptions adversely change sufficient early detection would
allow the development strategy to be amended along with current rent increases, interest
rates, inflation forecasts and void and bad debt levels.
The main financial risks to note continue to be:-
1. Handover dates of development. Any substantial delays will result in reduced rental
income and impact on cashflow.
2. Any substantial changes in LIBOR above the budget assumptions
3. Increases in voids and bad debts
4. Planned Maintenance programme changes. A substantial shift in the programme will
impact on cashflow and loans required to cover the committed spend.
5. Pension deficit movement. The deficit is due to be repaid by the end of 2022,
however this may need to be revisited after the September 18 valuation is released..
24To mitigate the risk as much as possible:-
1. Rental income for years 4 onwards assume only 6 months of the completed units
within the financial year will receive rental income.
2. Loan interest rates continue to be increased up to year 10 to acknowledge expected
increases in interest rates for all current variable loans. New loans have assumed an
interest rate of 4.25% in year 1 rising until year 6 where they remain fixed at 5%.
3. The planned maintenance programme is reflected at the current estimate levels of
expenditure taking into account stock increases and inflationary increases to include
adequate levels of contingency within the budget.
4. A contingency of an additional £1.5M spend is included over years 6 to 8 to allow for a
potential increase in the pension deficit.
5. The sensitivity review considers the impact of an increase in voids and bad debts
Assumptions and notes for 30 year projections 2019-20
2024/25-
Assumption 2021/22 2022/23 2023/24 2048/49
Year 3 Year 4 Year 5 Year 6 - 30
1 CPI % 2.0% 2.0% 2.0% 2.0%
2 Rent Increase % 2.0% 2.0% 2.0% 2.0%
3 Housing Voids % 2.0% 2.0% 2.0% 2.0%
4 Housing Bad Debts % 2.0% 2.0% 2.0% 2.0%
5 Salary award 2.0% 2.0% 2.0% 2.0%
6 Loan interest – Base Rate % 1.50% 2.0% 2.5% 3.0% - 5%
Interest receivable
Deposits – based on 95 days 0.75% 0.75% 0.75% 0.75%
7
> £1M
Special Interest Acc - RBS 0.25% 0.25% 0.25% 0.25%
Development
Completed units;
8
Social Rent 355 166 175 175
Mid Market Rent 215 78 75 75
Total 570 244 250 250
25HILLCREST HOMES (SCOTLAND) LIMITED
Outcome(s) Lead
Strategic Objective Operational Objective Action
2019/20 2020/21 2021/22 Person
Provide good quality, well maintained housing at Deliver 3 year approved development programme Take handover of completed projects 328 849 570 DZ
affordable rents on site (social rent and mid-market rent)
Implement maintenance programmes to improve Deliver all maintenance programme in line with £14.4m £13.8m £13.9m MP
the quality of the stock generally budgets
Maintain high customer satisfaction levels with Maintain high levels of performance and 95% 95% 95% MP
the maintenance service satisfaction levels for the repairs service
Increase number of responses to satisfaction 25% 30% 35% MP
surveys
Implement and deliver EESSH programme and Deliver programme by 2020 and present paper to
conclude on EESSH 2 Sub-committee on EESSH 2 100% complete MP
Consult, complete and implement the rent Develop a meaningful and robust consultation Complete Q4 BS/FM
harmonisation and rent setting exercise exercise and introduce the new rents
Meet the legislative change relating to the Install interlinked smoke alarm and heat alarm in 50% complete 10% complete MP
Electrical and Gas Safety Requirements the kitchen area and a smoke alarm in circulation
space
Contribute to building sustainable communities Meet the KPI’s set for Housing Management Improve void time targets 20 days 20 days 20 days BS
Rent Arrears 4.2% 4.2% 4.2%
Help people to sustain their tenancies Provide tenancy sustainment support and money 92% 93% 94% BS
advice to individuals. Percentage of new
tenancies sustained for > 1 year
Assisting tenants to manage their money Financial gain for tenants £300k £320k £350k BS
Help tenants to combat fuel poverty Complete the Fuel Poverty Strategy and agree Strategy complete BS
outcomes going forward
Publicise the availability of the tenant self-service Increase the no of tenants using the self-service 30% 30% 30% FM
portal portal.
Progress Tenant Scrutiny and tenant’s panel to Work with tenants to undertake another Tenant 1 inspections undertaken 1 inspections undertaken 2 inspections BS
deliver a further Tenant Led Inspection Led Inspection
Private Rented Sector Deliver one PRS scheme in period of business plan Scheme on site Scheme handover Scheme handover SD
and assess ability to finance more
Ellengowan Drive Deliver Ellengowan Drive On-going 80 units 50 units DZ/FM
Leith Links Prepare a detailed strategy to deal with the Leith Sell 20 units Sell 20 units Sell 20 units FM/AL
Links including estimated sales, purchase or sale
of remaining properties, tenure mix of remaining
tenancies and factoring arrangements after Leith
Links is wound up.Strategic Objective Operational Objective Action Outcome Outcome Outcome Lead
2019/20 2020/21 2021/22 Person
Provide quality, creative, responsive care and Provision of Tenancy Support Services Maintain/achieve improved grades from Care Grade 5 Grade 5 Grade 5 FM
support services Inspectorate
Provision of supported / homeless Lease Management Policy and Procedure review Completed by Q3 MP
accommodation through leasing arrangements and update
Health and Social Care Agenda Prepare a detailed strategy for approval by the JD/AL
Committee of Management and the Board of
Directors of Hillcrest Futures detailing how the
Hillcrest Group will engage to deliver the Health
and Social Care Agenda.
JD/AL
Rapid Rehousing/Homelessness Accommodation Complete a review of the homelessness provision Q2 – action plan
and produce an action plan for how to manage FM
surplus bedspaces
Contribute to social, economic and environmental ISO14001 Continue to retain the IS014001 accreditation for Oct 2019 Oct 2020 LDon
activities Hillcrest
Gift Aid Work with the profit generating companies in the Sept – consider gift aid bids Sept – consider gift aid bids Sept- consider gift aid LDon
Group to maximise the benefit from money gift- of £100k of £125k bids of £125k
aided
Charity Fundraiser/Grants Review the fundraising strategy in the Group and Submit successful grant Submit successful grant LDon
maximise income from grant applications and claims of £75k claims of £75k
fundraising activities to enhance the core services
provided. Longer-term strategy for AL/JD/RM
direct fundraising
Digital Transformation Hillcrest has a number of different application TBC TBC AL
packages which link in with various policies and
procedures. There is a need for a comprehensive
analysis, in conjunction with the compliance
required for the General Data Protection
Regulations which come into force in May 2018. AL
The review should highlight duplication of actions,
identify areas that can be streamlined and deliver
systems that are less resource intensive
Develop and deliver a new Tenants “App” to 50% tenants using the app 75% tenants using the app FM
enable customers to interact with the Hillcrest
Group at a time that suits themStrategic Objective Operational Objective Action Outcome Outcome Outcome Lead
2019/20 2020/21 2021/22 Person
Ensure resources, skills and structure to meet Ensure sufficient loan facility in place to support Loan deal for £40 million to be secured over the PP deal arranged AL/LDry
objectives proposed 3 year development programme period of the plan
Manage and minimise pension fund liabilities Review the pension provision and consider the Analyse Actuarial Valuation Review Pension Provision Committee
funding position after the actuarial valuation in
Sept 2018
Improve Committee Reporting and information Further develop Board Portal and electronic Ongoing Ongoing Ongoing AL/Committee
sharing distribution of Board Papers
Committee/Board Member’s recruitment exercise Recruit new board members to the Committee of Ongoing Ongoing Ongoing FM
and induction Management/Subsidiary Boards and further
develop a comprehensive induction process for
Committee/Board Members
Produce Annual Assurance Statement for Work with the Committee of Management to Aug 19 Ongoing Ongoing AL
submitting to the SHR develop a tool to deliver the statement
LDon
IIP Gain re-accreditation at Platinum Level for IIIP Rolling Review
LDon
Gain accreditation for Investor in Young People – Rolling Review
upgrade from Silver to Gold
LDon
Gain accreditation for Mental Health and Well- Rolling Review
being for the Hillcrest Group of Companies
Rationalisation of Group Structure and rebranding Complete the rationalisation of Group Structure Q1 complete L Don
exercise and the rebranding exercise and embed into Q4 ongoing
organisations communication
Freedom of Information Fully develop procedures and deliver training Q2 Ongoing Ongoing LDon
across the Group
Workforce Planning and succession plan Develop a workforce planning strategy Ongoing Review Ongoing Review LDonSWOT ANALYSIS
The SWOT analysis was reviewed at the Committee of Management Business Planning meeting in January 2019.
Strengths Weaknesses
Strong Financial Base Embracing technology to create efficiencies
Culture, Ethos, Standards Available Staffing Resources
Flexibility Internal Communication
Forward Thinking organisation Older Stock
Partnership Working • Fails to meet customer aspirations
Diverse Housing Opportunities • Options appraisal
Good Reputation/Brand • Cost of repairs and maintenance
Central Business Support Document Retention
People Friendly Services and High Standards Board gender imbalance
Development / Training of staff Workforce Planning
Good Employer Legacy Issues
• IIP Gold
• Healthcare Scheme
• Death in Service
Staff
• Ability & Attitude
• Specialised Knowledge
Opportunities Threats
Mobile Working Regulation Changes
Geographical Expansion Welfare Reform and Universal Credit
Partnership Working Customer Aspirations
Mergers – proactive not aggressive Reputation Risks
Digital Transformation Managing technology/security/cyber crime
Social Media Pension Deficit
Increasing Development Programme Labour Shortage - aging workforce/location
Increasing Reputation/Branding in New Areas BREXIT implications
More Regular Process review Board Gender Imbalance
Government Policy for more affordable homes Independence Referendum (2)
Private Rented Sector/Build to Rent Rapid Rehousing/Housing First
Apprenticeship Strategy Long term demand for mid-market / PRS
Health and Social Care Integration tenancies
Workforce planning strategy Introduction of fire safety regulation
New group structure
Re-branding
Expansion of Home Care ServicesPEST ANALYSIS
Committee members and senior staff also undertook a PEST (Political, Economic, Social, Technological) exercise.
The results of this exercise are plotted as follows;
Political / Legal Economic
Smith Commission – Devolution of Powers Interest Rates – Rise?
Health & Social Care Integration Mortgage Availability for Future Sales
Welfare Reform Income Caps for MMR
• Universal Credit – Arrears Welfare Reform (including Rent Arrears)
Funding Skills Shortage – Level of Pay (GC & HMS)
• Capital Investment Pressure on Funding
• Support Funding (SP End) • 22% down in Edinburgh
Regulation • £120K cuts in Angus
• SHR Fuel Poverty
• H&S Pension Deficit
• Care Inspectorate Market volatility
• SSSC
• OSCR
• GDPR
Procurement Legislation
Brexit
• Continued Membership
Socio-Cultural Technological
Changing demographic Mobile Working
Rise in Homelessness (result of economic Social Media – Communication Methods
factors) IT Literacy/Digital Inclusion
Urban Regeneration – Brownfield Sites Wifi in Developments
Models of Housing/Support Texting Software
Work/Life Balance Assistive Technology
Sustainability/Climate Change “Cloud” Technology
Equalities Digital Development
Debt Culture Training/E-learning
Cost of Credit Cope with Demand – Staff/Customers
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